The Supreme Court of the United States recently decided Bank of America Corp. v. City of Miami, Nos. 15-1111 & 15-1112, slip op. (U.S. May 1, 2017). The Court remanded the case for further proceedings, and it remains far from clear whether the City can prevail in the end. But the case illustrates the striking breadth of the federal Fair Housing Act (“FHA”). Any municipality, or anyone who deals with housing in any respect, should pay heed.
In the underlying litigation, the City of Miami alleged a pattern in which both Bank of America and Wells Fargo “intentionally issued riskier mortgages on less favorable terms to African-American and Latino customers than they issued to similarly situated white, non-Latino customers.” Id. at 3. The City further alleged that the banks’ practices “(1) adversely impacted the racial composition of the City, (2) impaired the City's goals to assure racial integration and desegregation, (3) frustrated the City's longstanding and active interest in promoting fair housing and securing the benefits of an integrated community, and (4) disproportionately caused foreclosures and vacancies in minority communities in Miami.” Id. (internal quotation marks and citations omitted). The result, the City asserted, was decreased property values in minority neighborhoods, “(a) reducing property tax revenues to the City, and (b) forcing the City to spend more on municipal services that it provided and still must provide to remedy blight and unsafe and dangerous conditions which exist at properties that were foreclosed as a result of the Banks’ illegal lending practices.” Id. (internal quotation marks and citations omitted).
The trial court dismissed the City’s complaints, holding that the City’s theory is not within the scope of the FHA and that the harms the City cites are too remote from the banks’ actions to allow recovery. On appeal, the U.S. Court of Appeals for the Eleventh Circuit reversed, deeming that the City had properly alleged claims that, if proven, would entitle it to damages. The Supreme Court agreed with the appellate court that the FHA does reach the City’s claims, but it also required further proceedings to determine whether the banks’ alleged actions caused the damages the City tries to pin on them.
The key holding for our purposes is about the FHA’s scope, or its “zone of interest.” As the Court explained: “The statute allows any ‘aggrieved person’ to file a civil action seeking damages for a violation of the statute.” Id. (internal quotation marks omitted). And it “defines ‘aggrieved person’ as any person who either claims to have been injured by a discriminatory housing practice or believes that such an injury is about to occur.” Id. at 6 (internal quotation marks omitted). The Court acknowledged the banks’ argument that such a capacious definition would mean “restaurants, plumbers, utility companies, or any other participant in the local economy could sue the Banks to recover business they lost when people had to give up their homes and leave the neighborhood as a result of the Banks’ discriminatory lending practices.” Id. at 8. Yet this argument did not cause the Court to blink.
Instead, the Court emphasized that it has long construed the FHA broadly, including prior holdings “that the Act allows suits by white tenants claiming that they were deprived benefits from interracial associations when discriminatory rental practices kept minorities out of their apartment complex; a village alleging that it lost tax revenue and had the racial balance of its community undermined by racial-steering practices, and a nonprofit organization that spent money to combat housing discrimination.” Id. at 6 (citing Trafficante v. Metropolitan Life Ins. Co., 409 U.S. 205, 209-12 (1972); Gladstone, Realtors v. Village of Bellwood, 441 U.S. 91, 110–11 (1979); Havens Realty Corp. v. Coleman, 455 U.S. 363, 379 (1982)). Further, the Court noted, Congress amended the FHA subsequent to some of these decisions and did not change the statutory definition of “aggrieved person.” See id. at 7. Thus, the Court concluded, “[p]rinciples of stare decisis compel our adherence to those precedents” and “principles of statutory interpretation require us to respect Congress’ decision to ratify those precedents when it reenacted the relevant statutory text.” Id. at 8.
Dissenting from the Court’s broad reading of the FHA, Justice Thomas (joined by Justices Kennedy and Alito) criticized the breadth of the Court’s statutory construction: “Miami's complaints do not allege that any defendant discriminated against it within the meaning of the FHA. Neither is Miami attempting to bring a lawsuit on behalf of its residents against whom petitioners allegedly discriminated. Rather, Miami’s theory is that, between 2004 and 2012, petitioners’ allegedly discriminatory mortgage-lending practices led to defaulted loans, which led to foreclosures, which led to vacant houses, which led to decreased property values, which led to reduced property taxes and urban blight.” Id. at 10 (Thomas, J., dissenting in part and concurring in part). But the majority’s capacious interpretation is the law.
To be sure, the Court’s cautions against allowing recovery for remote harms may, as it plays out in the lower courts, prove a significant restriction on the use of the FHA. It is too soon to predict exactly how that aspect of the opinion will play out, however.
The Bank of America decision has two important takeaways. First, the FHA is not limited to obvious cases of housing discrimination by landlords; it captures a broad range of actions by a broad range of actors, including municipalities, banks, and others. Second, claims under the FHA are not limited to plaintiffs who were the direct victims of housing discrimination; a wide swath of plaintiffs—including individuals, municipalities, and businesses—have legal standing to seek redress under the FHA.